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Trump Administration Could Blacklist China's Hikvision, a Surveillance Firm

The Trump administration is considering limits to a Chinese video surveillance giant's ability to buy American technology, people familiar with the matter said, the latest attempt to counter Beijing's global economic ambitions.

The move would effectively place the company, Hikvision, on a United States blacklist. It also would mark the first time the Trump administration punished a Chinese company for its role in the surveillance and mass detention of Uighurs, a mostly Muslim ethnic minority.

The move is also likely to inflame the tensions that have escalated in President Trump's renewed trade war with Chinese leaders. The president, in the span of two weeks, has raised tariffs on $200 billion worth of Chinese goods, threatened to tax all imports and taken steps to cripple the Chinese telecom equipment giant Huawei. China has promised to retaliate against American industries.

Hikvision is one of the world's largest manufacturers of video surveillance products and is central to China's ambitions to be the top global exporter of surveillance systems. The Commerce Department may require that American companies obtain government approval to supply components to Hikvision, limiting the company's access to technology that helps power its equipment.

Administration officials could make a final decision in the coming weeks.

The combination of more traditional surveillance equipment with new technologies, like artificial intelligence, speech monitoring and genetic testing, is helping make monitoring networks increasingly effective - and intrusive. Hikvision says its products enable their clients to track people around the country by their facial features, body characteristics or gait, or to monitor activity considered unusual by officials, such as people suddenly running or crowds gathering.

The potential crackdown stems from the Trump administration's belief that China poses an economic, technological and geopolitical threat that cannot be left unchecked. The United States has targeted Chinese technology companies like Huawei that it believes could pose a national security threat given deep ties between the Chinese government and industry and laws that could require Chinese firms to hand over information if asked.

Adding to those concerns are the global human rights implications of China's extensive surveillance industry, which it increasingly uses to keep tabs on its own citizens. The Chinese have used surveillance technology, including facial recognition systems and closed-circuit television cameras, to target the Turkic-speaking Uighurs, who have accused the Chinese government of discriminating against their culture and religion.

China has constructed what amounts to a police state in the country's northwest region of Xinjiang, which Uighurs consider their homeland. That includes extensive surveillance powered by companies like Hikvision and barbed wire-ringed internment compounds that American officials estimate hold 800,000 to as many as three million Muslims.

China has begun exporting this technology to nations that seek closer surveillance of their citizens, including Ecuador, Zimbabwe, Uzbekistan, Pakistan and the United Arab Emirates.

"Hikvision takes these concerns very seriously and has engaged with the U.S. government regarding all of this since last October," a Hikvision spokesman said in an emailed statement. "In light of them, the company has already retained human rights expert and former U.S. ambassador Pierre-Richard Prosper to advise the company regarding human rights compliance. Separately, Hikvision takes cybersecurity very seriously as a company and follows all laws and regulations in the markets we operate."

Since last year, administration officials have debated what to do about China's attempts to clamp down on the cultural and religious practices of the Uighurs. But they have refrained from taking action, in part because some American officials worried a move would derail attempts to win a trade deal with China.

Secretary of State Mike Pompeo said in an interview with Fox News on May 2 that the administration was concerned "that the Chinese are working to put their systems in networks all across the world so they can steal your information and my information." He mentioned the Muslim internment camps, adding, "This is stuff that is reminiscent of the 1930s that present a real challenge to the United States, and this administration is prepared to take this on."

Since trade talks with Beijing nearly crumbled early this month, the administration has quickly ramped up economic pressure on China. It is moving ahead with plans to tax an additional $300 billion in products, and announced a sweeping executive order cutting off Huawei from purchasing the American software and semiconductors it needs to make its products. While American companies can try to obtain a license to continue doing business with Huawei, firms like Google are making plans to curtail the products and services that they supply.

The administration is also attempting to prosecute a top Huawei executive, Meng Wanzhou, who faces criminal charges in the United States and is under house arrest in Canada, where she awaits a court decision on extradition.

The measure against Hikvision would operate similarly to Huawei's license requirement. The Commerce Department would place it on an "entity list," which requires designated foreign companies and American companies to get United States government approval before they do business with one another.

"Taking this step would be a tangible signal to both U.S. and foreign companies that the U.S. government is looking carefully at what is happening in Xinjiang and is willing to take action in response," said Jessica Batke, a former State Department official who has done research in Xinjiang and testified before Congress on the issue. "At the same time, however, the ongoing trade war perhaps undercuts the perception that this is coming from a place of purely human rights concerns."

The Commerce Department and the White House declined to comment.

On Wednesday, the China's foreign ministry urged countries to treat Chinese companies fairly.

"We have repeatedly stated that China opposes the United States's practice of abusing state power and arbitrarily discrediting and suppressing foreign enterprises, including Chinese enterprises," Lu Kang, a ministry spokesman, said at a regular briefing in Beijing in a response to a question about the possibility of blacklisting Hikvision.

Hikvision is little known in the United States, but the company supplies large parts of China's extensive surveillance system. The company's products include traffic cameras, thermal cameras and unmanned aerial vehicles, and they now allow Chinese security agencies to monitor railway stations, roads and other sites.

It is not immediately clear what effect a United States ban would have on Hikvision's business. The company appears to source just a small portion of its components from the United States, and any such ban could speed its efforts to switch to Chinese suppliers.

But Hikvision does have a growing international presence, and its executives have warned in the past about the potential for rising anti-China sentiment in the United States to affect its operations. The company says it has more than 34,000 global employees and dozens of divisions worldwide, and it has supplied products to the Beijing Olympics, the Brazilian World Cup and the Linate Airport in Milan. It has tried to expand into North America in recent years, employing hundreds of workers in the United States and Canada, setting up offices in California and building a North American research and development team headquartered in Montreal.

In a letter published in English in April, Hikvision's chief compliance officer said that the company was taking reports that video surveillance products had been involved in human rights violations seriously and had commissioned an internal review of its operations to enhance screening standards to better protect human rights. "We are taking a hard look at our products and business," the officer, Huang Fanghong, wrote.

Members of Congress from both parties have called on the administration to impose sanctions on companies involved in aiding China's persecution of Muslims, including Hikvision. In an August 2018 letter, legislators also urged the Commerce Department to strengthen its controls over technology exported to these companies, and called on the government to increase disclosure requirements for publicly traded companies that might be complicit in human rights abuses.

Hikvision and Dahua, another company cited by lawmakers, are both listed on the Shenzhen stock exchange. MSCI, one of the largest index providers in the United States, added Hikvision to its benchmark emerging markets index last year. UBS and J. P. Morgan are among the company's top 10 shareholders, according to Hikvision.

Representative Adam B. Schiff, Democrat of California, said in an interview that the House Intelligence Committee, which he leads, could scrutinize more closely American companies that are investing in or partnering with Chinese firms that are building up the Chinese surveillance state.

Congress and the administration have responded with other measures that may clamp down on Hikvision's business. Congress included a provision in its 2019 military spending authorization bill that banned federal agencies from using Chinese video surveillance products made by Hikvision or Dahua.

The Trump administration is also considering imposing sanctions on specific Chinese officials known to play critical roles in the surveillance and detention system in Xinjiang. These sanctions would be imposed under the Global Magnitsky Act. The highest-ranking official being considered for this type of targeted sanction is Chen Quanguo, a member of the party's Politburo and party chief of Xinjiang since August 2016.

The State Department and White House National Security Council support imposing the sanctions, but officials at the Treasury Department have pushed back, citing a desire not to upset the trade talks, even though those have bogged down. Treasury Secretary Steven Mnuchin has advocated maintaining strong business ties with China.

The Commerce Department is also working on new restrictions on the types of potentially sensitive American technology that can be exported to foreign businesses, which are likely to touch on artificial intelligence and 5G abilities.

[Source: By Ana Swanson and Edward Wong, The New York Times, Washington, 21May19]

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